Pound extends gains following UK GDP report

The news shaping the markets today

Ukraine’s President Volodymyr Zelenskyy said Russia’s military forces had destroyed major infrastructure in the southern city of Kherson. The news sent WTI crude oil futures higher this morning.

Ireland’s BNP Paribas Real Estate Construction PMI fell to 47.4 in October, from 50.2 a month ago. This being the weakest reading since July exerted pressure on the EUR/USD forex pair.

New Zealand’s Performance of Services Index rose to 57.4 in October, versus 55.9 in the prior month, which sent the NZD/USD pair higher in forex trading this morning.

India’s total passenger vehicles sales fell 5.4% to 291,113 units in October, after 9.3% growth in the previous month, which exerted pressure on the INR/USD forex pair.

Colombia’s retail sales grew 7.2% year-over-year in September. This being the lowest growth since February sent the COP/USD pair lower in forex trading this morning.

What’s happening: The British pound recorded gains against the US dollar on Friday.

What happened: On Friday, the sterling extended its gains recorded in the previous session, following the release of the UK GDP report.

However, one of the major UK indices settled on a negative note in the session.

Why it matters: The GBP/USD forex pair had recorded its biggest daily surge since March 2020 on Thursday, after data showed US consumer prices cooling off in October, which triggered speculations of the Federal Reserve easing its interest rate hikes going ahead.

Data released on Friday showed the UK economy contracted by 0.2% on quarter during the three months to September, lower than the consensus estimates of a 0.5% decline. The data increased prospects of the Bank of England continuing its policy tightening to combat surging inflation in the country.

The British economy grew by 2.4% year-over-year in the third quarter. Although this was the lowest reading since the contraction in the first quarter of 2021, it was still better than the expert projections of 2.1%.

The UK has been recording accelerating inflation, which has reached the double-digit mark. Earlier this month, the Office for National Statistics had reported consumer prices rising 10.1% year-over-year in September, up from 9.9% in the previous month.

Britain also released some other major economic reports on Friday. The UK trade deficit narrowed to £3.1 billion in September versus £4.7 billion a month ago, recording the smallest trade gap since last December. Industrial production in the country grew by 0.2% in September, after a 1.4% decline in the previous month.

The British pound extended gains versus the greenback, rising to the highest level since late August. The GBP/USD forex pair climbed more than 1% to 1.1837 on Friday.

UK stocks gave up gains recorded earlier in the session to settle lower on Friday. London’s FTSE 100 fell 0.78% to close at 7,318.04, while the more domestic-focused FTSE 250 jumped 1.23% to 19,616.21.

What to watch: Traders will keep an eye on the announcement of the new government’s first economic plan, with the country’s Finance Minister Jeremy Hunt expected to disclose up to £60 billion of tax rises and spending cuts on November 17.

The release of jobs and inflation reports, due this week, will also remain in focus.

The markets today

Gold will be in focus today after closing higher on Friday

Context: Gold moved higher on Friday, reaching another settlement at its highest level since August.

Details: Gold extended gains on Friday as signs of easing inflation in the US increased hopes of the Federal Reserve slowing its aggressive interest rate hikes.

Traders expect a 71% chance of the US central bank raising interest rates by a lower 50 basis points at its December meeting. This provided support to gold prices as higher interest rates increase the opportunity cost of holding the non-yielding yellow metal.

The US dollar also extended losses, falling to more than a two-month low, which increased the appeal for gold for foreign buyers. The US dollar index, which measures the greenback’s performance versus a basket of major rivals, fell around 1.7% to 106.42 on Friday.

The dollar index continued its downturn after data on Friday showed the University of Michigan’s consumer sentiment declining to 54.7 in November, from 59.9 in October.

Gold futures for December gained $15.70, or 0.9%, to close at $1,769.40 per ounce on the Comex. This marked the strongest settlement since August 25. The yellow metal ended the week with gains of 5.5%.

Silver futures for December fell 0.2% to $21.667 per ounce on Friday but recorded a weekly gain of around 4.3%. December copper added 4.1% to reach $3.9135 per pound, gaining over 6.2% for the week. Palladium futures for December surged 3.7% to $2,026.50 per ounce, while platinum futures for January declined 1.6% to $1,038.10 per ounce.

What are expectations: Traders will keep an eye on the US dollar’s movements, as any further decline will drive gold to another high. Markets will also continue monitoring comments from Fed speakers regarding the monetary policy.

Other Markets: European trading indices closed higher on Friday, with the DAX 40, CAC 40 and STOXX Europe 600 up by 0.56%, 0.58% and 0.09%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

India’s wholesale price inflation rate and consumer prices data, Eurozone’s industrial production, Turkey’s total motor vehicles production, Brazil’s IBC-Br index of economic activity and Central Bank of Brazil’s focus market readout, US consumer inflation expectations, as well as Indonesia’s total car sales.